Bythe Monitor's Editorial BoardMarch 4, 2011

First Wisconsin, and now Ohio, have moved to deflate the power of public-worker unions. Other states, even with Democrats in charge, are asking concessions from government workers – on wages, pensions, and health benefits.

So far, the battle has been rancorous and divisive, appearing to pit unions against taxpayers. The focus has been on laws passed in many states since 1959 – starting with Wisconsin – that allow civil servants to strike or that require forced mediation in disputes.

Meanwhile, this struggle over “collective bargaining” by public unions is seen as a proxy for the future of private-sector unions, which have been in decline since 1970.

One side sees public unions as necessary to help government employees keep or achieve middle-class incomes, and even to reduce the nation’s rising disparity in income and a stagnation in wages.

Both sides wrangle over conflicting studies on whether public workers are compensated higher or lower than private workers. They also debate how much civil servants must now share in the sacrifices needed to balance government budgets.

So far this debate has been too narrow.

Political tactics and old arguments seem to matter more than finding a fresh perspective that could point to solutions. All sides need to step back, take a breath, and look for a bigger picture.

The confrontation over public unions, which comes mainly from elected Republicans but is also driven by declining state coffers, is just one of many debates that arose from the 2007-08 Great Recession.

From Wall Street bailouts to housing subsidies to the extension of Bush-era tax cuts, Americans have largely quarreled over one topic: who gets what in a sluggish economy, or how to fairly distribute the nation’s wealth.

Private unions, which rose to strength in the 1930s, were once seen as the great equalizers for lower-income Americans. They largely were. By the 1960s, Democratic leaders began to pass laws giving public workers the same clout.

Private unions did well as long as companies had few choices on where to do business. But when companies began to move to nonunion states or, more important, moved their factory operations overseas, the movement declined. In 2008, only 7.2 percent of private workers were in unions.

Now with the unemployment rate expected to persist at 8 to 9 percent for years, and with a falloff in federal aid to states, public unions are under similar pressure. Collective bargaining may no longer be the only way to ensure workers can enjoy rising incomes.

The recession saw the loss of 8.4 million jobs. Only a portion have returned. Just to avoid more losses, the economy needs to create at least 125,000-150,000 jobs a month. It’s barely doing that, as seen in Friday’s report of 192,000 new jobs created in February.

President Obama’s actions since taking office are a good barometer of a political shift away from a focus on redistribution of wealth toward creating wealth.

He came to power criticizing “fat cats” on Wall Street, for example, but by late last year, his new chief of staff came from a Wall Street firm. His 2009 economic stimulus was loaded with federal subsidies for state-level jobs. But after that didn’t do much to boost the economy, he is now loosening federal regulations on business. And he backs a $600 billion effort by the Federal Reserve to lower interest rates to encourage private firms.

Now the government focus is on expanding options for individual opportunity – in starting new businesses, retraining workers for new jobs, and improving worker productivity with better infrastructure. Even in the debate over government support of housing, Obama is leaning toward encouragement of renting. Worker mobility in moving to new jobs is seen as a way to boost upward social mobility.

Unions need to fit into this new picture, one that deals ultimately with the origin of wealth.

In the 19th century, labor was seen as the source of prosperity. Laws began to favor workers. By the end of the 20th century, with the collapse of communist regimes and the shift of Western liberals like Bill Clinton and Tony Blair toward market-friendly policies, the world began to see that innovation in ideas and the wise use of risk capital were the true creators of wealth. Think Google, Apple, and Facebook, or a revived Ford and GM – after their unions shifted to helping the companies turn around.

Issues such as the “right” of public workers to strike could become less contentious if governments saw their role as boosting the ability of private enterprise to adopt competitive ideas that create jobs. Working for government may no longer be regarded as a lifelong career if there is a vibrant economy.

Compensation scales for public workers could then be easier to match up with private-sector ones. Many states, for instance, want to move to 401(k)-style retirement plans or adopt health plans like those offered by companies.

A bad economy needs good ideas – and more cooperation. Public unions and state leaders would be less at odds if they both saw government as a tool for growth based on creating jobs around commercial ideas.

The political heat now seen in state capitals like Madison or Columbus might cool down fast if that were to happen.